The Dynamic Environment of International Trade - PowerPoint

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					The Dynamic Environment of
    International Trade
         Chapter 2
History of World Trade

• Early Twentieth Century
  – Great Depression
  – World War II
• Late Twentieth Century
  – Marshall Plan
  – Decolonization
  – Lowering of trade restrictions
History of World Trade
• Problems with internationalization in
  – Resistance to U.S. investment
  – Increasing competition
• U.S. Balance of Trade
  – 1888-1971= Trade surplus
  – Since 1971= Trade deficit
• Free trade
• Asian markets
History of World Trade

• Recent Trends
  – Rise of other economies
  – Smaller companies going global
Balance of Payments
• What is it?
• Receipts from other countries (plus side):
  –   Export sales
  –   Money spent by foreign tourists
  –   Foreign investments into the U.S.
  –   Foreign government payments
• Payments to other countries (negative side):
  –   Imports
  –   Spending by American tourists overseas
  –   New overseas investments
  –   Cost of economic and military aid
Balance of Payments
• Three types of accounts
  – Current account
  – Capital account
  – Reserves account

• If a country’s expenditures > income, its citizens
  must reduce standard of living, or its money will
  lose value against other countries’.
  – Deficit= Loss of value for the dollar

• Acts to “protect” a country’s markets from
 foreign competitors
  – Why?
     • Infant industry
     • National defense
     • Industrialization of underdeveloped countries

• Tariffs
  – A tax on imported goods
• Quotas
  – A unit or dollar limit placed on a good
  – Sometimes paired with tariffs
• Voluntary Export Restraints
• Boycotts and Embargoes
  – What’s the difference?

• Monetary Barriers
  – Blocked currency
  – Differential exchange rate
  – Government approval to secure foreign
• Standards
• Antidumping Penalties
Easing Trade Restrictions

• Market access
  – Allows US to retaliate against protectionism
• Export expansion
  – Easier to gain an export license
  – Government responsible for exporter needs
• Import relief
  – Offers assistance to companies impacted by
Easing Trade Restrictions

• General Agreement on Tariffs and Trade
  – U.S. and 22 other countries
  – Reduces tariffs
  – Set up an organization to monitor trade
  – Resulted in deep cuts of tariffs
Easing Trade Restrictions

• World Trade Organization
  – Began in 1995
  – Governs trade
  – Settles disputes and issues penalties against
    countries practicing protectionism
Easing Trade Restrictions

• International Monetary Fund
  – Stabilize exchange rates
  – Lends money to member countries
  – Special drawing rights
     • Average base of value to counter fluctuations in
       world gold values
Easing Trade Restrictions

• World Bank Group
  – Lend money and provide assistance to
    developing countries
  – Mediate between investors and foreign

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